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OCBC Investment Research raised its target price for Petra Foods Ltd to S$3.12 from S$2.98 and maintained its 'buy' rating, saying its valuation premium is justified due to the company's exposure to emerging consumer demand in Asia.
OCBC raised its valuation of Petra to 25 times 12-month forward price-earnings from 24 times.
Petra shares were down 1.05 percent at S$2.84 on Monday. The stock has risen 53.5 percent so far this year, leading the 29 percent gain in the FT ST Mid Cap Index.
OCBC expects revenue growth of 3.8 percent for 2013 fiscal year mainly on the back of Petra's branded consumer division, which is driven by consumption growth in the company's key markets of Indonesia and the Philippines.
The combination of higher-margin product mix, average selling price increases and favourable raw material costs have helped Petra's branded consumer unit to offset the weakness in the cocoa ingredients division, OCBC said.
Petra manufactures and supplies cocoa ingredients, on top of selling its own confectionery brands, such as the SilverQueen chocolate which is popular in Indonesia.
OCBC expects an easing of the yield pressure in the cocoa ingredients division in the coming months, helping group margins to improve to around 9 percent in 2013 fiscal year from 7.6 percent in 2011.
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